Devon makes a key acquisition

Article Excerpt

DEVON ENERGY, $8.63, is a buy. The company (New York symbol DVN; TSINetwork Rating: Extra Risk) (www.dvn.com; Shares o/s: 382.6 million; Market cap: $3.4 billion; Dividend yield: 5.1%) is a leading producer of oil and natural gas from wells in Wyoming, Texas, Oklahoma and New Mexico. Devon will now buy WPX Energy (symbol WPX on New York) to create one of the biggest U.S. shale producers. The deal should help the two companies ride out the oil-market slump. The coronavirus economic slowdown has only deepened the challenges. Apart from considerable cost savings by combining operations, Devon and WPX plan to abandon the shale industry’s old strategy of pursuing rapid production growth at all costs. They will instead focus on generating income that exceeds drilling expenses and returns excess cash to their shareholders. The combined company will work to limit exploration and development spending to 70% to 80% of cash flow. It will also limit production growth to 5%, even in a more favourable…

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